February 22, 2021
Critics claim environmental regulations hurt productivity and profits, but the reality is more nuanced, according to an analysis of environmental policies in China by a pair of Cornell economists.
The analysis found that, contrary to conventional wisdom, market-based or incentive-based policies may actually benefit regulated firms in the traditional and “green” energy sectors, by spurring innovation and improvements in production processes. Policies that mandate environmental standards and technologies, on the other hand, may broadly harm output and profits.
“The conventional wisdom is not entirely accurate,” said Shuyang Si, a doctoral student in applied economics and management. “The type of policy matters, and policy effects vary by firm, industry and sector.”
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Policy, not technology, fueled Danish dominance in wind energy
News Highlights: Policy, not technology, fueled Danish dominance in wind energy
In emerging renewable energy industries, are manufacturers’ decisions to shut down or upgrade obsolete equipment more influenced by technological improvements or government policies?
It’s an important long-term question for policymakers looking to increase renewable electricity production, cost-effectiveness and efficiency with limited budgets, says C.-Y. Cynthia Lin Lawell, associate professor at the Charles H. Dyson School of Applied Economics and Management.
In a new study focused on Denmark, a world leader in wind energy – a relatively mature and inexpensive renewable technology – Lin Lawell found that government policy was the main driver of that industry’s growth and development.